personal finance for emergencies

Hi , i am wondering if you have thoughts on the question of debt v. emergency fund in a context where things get really bad (worse than they are now). I have about $8k out on a home equity line of credit at about 3.5%. I have enough in my emergency funds to pay this off. It would take me about 12 months to save that amount back up again.  Since using YNAB i know/I believe that I won't go into debt again, so this is just about clearing the debt I brought with me.

Part of me thinks - just pay it off - if I actually do have an emergency in the next 12 mos, I can tap my HELOC. Another part thinks, maybe not? Are there emergencies that are *so* emergency that things like lines of credit get shut down? Should I keep my cash on hand in case of one of those? What are your thoughts?

Also, are there any other kinds of planning should I be doing around emergencies, other than emergency funds?


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  • You are currently paying $23 per month for the flexibility to have cash instead of paying off the debt. Your call if that's worth paying.

    Turn it around... If you were debt free, would you take out a loan just to have $8k in the bank?

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  • I don't think I would rely on a HELOC for a future emergency. In 2008 people did that and found the banks were reducing or eliminating available draws due to economic conditions. The current ecomomic climate could see a repeat of that.

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    • nolesrule thank you, that's just what I was wondering.

      I wouldn't take out an EF on credit, but I also wouldn't spend my EF to pay down my mortgage , so I was having trouble figuring out which category to put this HELOC debt in. I'll hurry up to pay it down but not use my EF. Thank you! 

      Any other emergency finances tips from you or others, I am all ears!

  • This is very timely for I’m going through this right now also. I’m building an addition, hence why the HELOC. I’ve used at least half of my Emergency funds to pay for part of the cost and was wondering if I should hold on to the last half of the cash and just use more of the Heloc. 

    This would mean I’m paying $105 (35k at 3.5%) of interest a month vs $59 (20k)

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